Identifier
Created
Classification
Origin
08DOHA521
2008-07-24 13:18:00
CONFIDENTIAL
Embassy Doha
Cable title:  

QATAR INVESTMENT AUTHORITY, PART TWO: ASSETS AND

Tags:  EINV EFIN ECON QA 
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PP RUEATRS RUEHC RUEHZM RUEHAE RUEHHE RUEHJA
RUEHKL RUEHLO RUEHMO RUEHNY RUEHFR RUEHGP RUEHTRO RHMFISS
RUCPDOC
DE RUEHDO #0521/01 2061318
ZNY CCCCC ZZH
P 241318Z JUL 08
FM AMEMBASSY DOHA
TO RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 8072
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHAE/AMEMBASSY ASMARA PRIORITY 0110
RUEHHE/AMEMBASSY HELSINKI PRIORITY 0047
RUEHJA/AMEMBASSY JAKARTA PRIORITY 0095
RUEHKL/AMEMBASSY KUALA LUMPUR PRIORITY 0044
RUEHLO/AMEMBASSY LONDON PRIORITY 1106
RUEHMO/AMEMBASSY MOSCOW PRIORITY 0277
RUEHNY/AMEMBASSY OSLO PRIORITY 0139
RUEHFR/AMEMBASSY PARIS PRIORITY 0162
RUEHGP/AMEMBASSY SINGAPORE PRIORITY 0403
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0018
RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 DOHA 000521 

SIPDIS

E.O. 12958: DECL: 07/24/2018
TAGS: EINV EFIN ECON QA
SUBJECT: QATAR INVESTMENT AUTHORITY, PART TWO: ASSETS AND
INVESTMENT STRATEGY

REF: A. DOHA 518

B. 2007 DOHA 142

C. ASMARA 70

D. ASMARA 81

Classified By: CDA Michael A. Ratney for Reasons 1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 03 DOHA 000521

SIPDIS

E.O. 12958: DECL: 07/24/2018
TAGS: EINV EFIN ECON QA
SUBJECT: QATAR INVESTMENT AUTHORITY, PART TWO: ASSETS AND
INVESTMENT STRATEGY

REF: A. DOHA 518

B. 2007 DOHA 142

C. ASMARA 70

D. ASMARA 81

Classified By: CDA Michael A. Ratney for Reasons 1.4 (b) and (d).


1. (SBU) Summary: The Qatar Investment Authority (QIA) holds
its estimated USD 60 billion in a wide variety of
investments. Not content to sit on Treasury bills and other
conservative, low-return assets, the QIA is buying
significant stakes in Western and Asian firms, and taking on
riskier investments throughout the developing world. Despite
some financially questionable investments, inflows from
government surpluses are increasing sharply as Qatar begins
to reap enormous profits from its expansion of liquefied
natural gas (LNG) production. The QIA uses a number of
different investment vehicles which vary in degrees of
transparency. This report is the second of three examining
the QIA, and is assembled from Emboffs' meetings with various
QIA employees over the past year, and information gathered
from other contacts and press reporting. End Summary.

Assets and Investment Strategy
--------------


2. (C) The QIA's total assets under management remain a
closely-guarded secret, but a commonly-accepted commercial
estimate values the fund at USD 60 billion. One mid-level
QIA contact said the fund is worth USD 64 billion, but it is
unclear if he is speaking knowledgeably, as Finance Minister
and QIA Board Member Kamal indicated recently that only the
board knows the true figures. With Qatar's rapidly expanding
natural gas exports and resulting multi-billion dollar budget
surpluses, the QIA's base of available investment funds is
likewise expanding rapidly. At the same time, share price
drops in some of QIA's significant investments (such as
British retailer Sainsbury's) may have undercut some of the
fund's value. (Note: The estimate of USD 60 billion would
mean the fund is worth almost double the government's annual
budget and 85 percent of the country's USD 71 billion 2007
GDP.) As an example of the scope of potential investments,
in fall 2006 QIA unsuccessfully bid USD 18 billion for Thames
Water, a British utilities company (though undoubtedly a

large proportion of the bid would have been raised via
private financing).


3. (C) According to Executive Board Member Dr. Hussein
al-Abdulla, the QIA's strategic goal is to steward the state
of Qatar's current surplus for long-term investment and to
find alternative sources of income so that the country is
able to survive without oil and gas revenues in the future.
At the same time, al-Abdulla pointed out that the board looks
for short-term money-making opportunities. He and other QIA
leaders receive bonuses and perks based on the fund's annual
growth. The high rate of inflation in Qatar (currently over
14 percent) is also prompting the QIA to search for
opportunities with high returns. Prime Minister/Foreign
Minister and QIA CEO Hamad Bin Jassim Al Thani (HBJ) said
during a press interview last summer that inflation would eat
any of their investments in Treasury bills, so QIA needs to
"find a way to break through the cycle of dollar and interest
rates."


4. (SBU) Analysis of QIA's reported investments does show
broad asset-class and geographic diversity. A Monitor Group
list of 22 publicly-reported deals from 2000 to the first
quarter of 2008 (valued at USD 12 billion) revealed that 38
percent of investments were in financials, 27 percent in
healthcare, and 24 percent in real estate, with 11 percent in
other holdings. This public analysis is undoubtedly only a
slice of the QIA's true investments; however, without further
data it is impossible to estimate how much of the fund is
concentrated in a particular asset or area. It does seem
clear that the QIA is more willing than some sovereign wealth
funds (SWFs) to undertake risky, non-Western investments.


5. (C) Also unlike some other SWFs, the QIA does not/not
operate under any specific rules for contributing parts of
government surpluses to the fund. The QIA is given money as
part of the annual budget process and the amount varies
depending on the size of the surplus, according to
al-Abdulla. He stated that the QIA does not want specific
information in this area to be made public because the QIA
and GOQ would then receive pressure from Qatari society to
distribute money now to Qatari nationals, and developing
countries would also probably request additional aid.


6. (C) The QIA is not invested in the energy sector, both
because the fund's goal is to diversify Qatar's economy away
from hydrocarbons, and because state-owned Qatar Petroleum
has a separate dedicated fund (Qatar Petroleum International)
to participate in hydro-carbon projects. Robert Cheberiak, a
Certified Financial Analyst (CFA) who works for QIA, said the
organization has several accounts with specific social goals,
such as an education and health fund designed to help meet
the state's liabilities in this area.


7. (SBU) The QIA has historically invested in the United
States and Europe, but in the last year various officials,
including HBJ, have signaled their intention to seek greater
diversity, particularly in Asia and non-dollar-based assets.
In fall 2007, Qatari officials reported that the QIA had cut
its exposure to the dollar from 99 percent to 40 percent.
Contacts indicate that the QIA is increasingly wary of
investing in the United States due to the prospect of a
recession and concern over potential political backlash in
the U.S.


8. (C) Still, al-Abdulla told visiting U.S. Senator Evan Bayh
in February (Ref B) that 2007 was a "pretty good year" for
QIA's investments in the U.S., which he said had an average
rate of return of about 8 percent. Moreover, various fund
officials have noted that the downturn in the U.S. economy
may provide a good opportunity to invest in U.S. financial
firms and construction companies. HBJ was quoted in the
press in February saying that the QIA is looking to invest
USD 10-15 billion over the next two years in banks; he added
that Qatar should wait for further drops in the value of U.S.
firms before investing there. One analyst told Econoff that
the QIA is looking to invest in places where the economies
are negatively correlated with Qatar's revenue stream from
oil prices (i.e., where the economies receiving investment
would benefit and therefore return higher margins during
times of low oil prices).


9. (C) The real estate division holds significant investments
in London, Paris, Milan, and Southeast Asia. In London, a
QIA subsidiary recently purchased a former British military
facility, Chelsea Barracks, via a USD 2.5 billion Islamic
financing package, and is converting the land into prime
residential and office space. The QIA has growing affiliated
offices in London and Paris and is considering opening an
office in India, according to al-Abdulla


10. (C) Some of QIA's investments appear to be based as much
on the personal predilections of the Amir and HBJ as on any
economic logic. In particular, Qatari Diar (see below) has an
appetite for investments far afield and has signed agreements
for several large resort, hotel, and export industry projects
in economically inauspicious markets like Eritrea (see Refs C
and D),Sudan, and Mauritania. HBJ appears to have a
particular fondness for investments in the UK, where he
personally owns several expensive properties. Other notable
QIA holdings as reported in press are listed below:

Sainsbury (UK) - 26 percent
London Stock Exchange (UK) - 15 percent
Barclays Bank (UK) - 6 percent
Credit Suisse (Switzerland) - 2 percent
Housing Bank for Trade and Finance (Jordan) - 20.6 percent
Raffles Medical Group (Singapore) - 4.87 percent
European Aeronautical Defense and Space Company (EADS) - 5
percent
Lagardre (France) - 6 percent

Investment Vehicles
--------------


11. (SBU) As with any large fund, the QIA receives a lot of
outside investment proposals, even as it builds an in-house
team to assess and seek out investment opportunities. QIA
makes use of subsidiary companies and special funds with
their own leadership for negotiation and management of large
deals, such as real estate projects or the failed Sainsbury's
acquisition. For the most part, the QIA uses financial
intermediaries to conduct research, assess, negotiate, and
ultimately undertake investments. Among the most high
profile were Delta Two and Three Delta, a fund and advisory
group controlled by British financier Paul Taylor, until the
QIA moved to cut ties with him earlier this year, reportedly
due to differences of opinion over UK investments. Qatar
Holdings LLC presents another public face of the QIA and was
registered in 2006 at the Qatar Financial Center. This firm
makes investments in major capital markets, and is the
vehicle by which the QIA invested in the LSE and Nordic
exchange operator OMX.


12. (C) Among the most significant of QIA's holdings is
Qatari Diar, a 100 percent QIA-owned company, founded in
2005, dedicated to investing in real estate in Qatar and
abroad. Diar owns Qatar National Hotels, a group established
in 1993 which owns 13 luxury hotel properties in Qatar,
giving it control of a majority of the hotel capacity in the
country. Diar is also building major projects in Qatar
including a new convention center and the Lusail development,
a massive residential/commercial/recreational project
intended to eventually accommodate 200,000 people. Further
afield, Diar is undertaking real estate development projects,
including tourism and residential properties, in Sudan, Cuba,
Mauritania, Syria, Eritrea, and other developing countries.
The QIA reportedly sees these as potentially profitable
investments, though it also seems clear that HBJ and other
senior GOQ leaders consider these investments as a means of
furthering Qatar's bilateral political relations with those
countries. John Ward, the Lebanese-American COO of Qatari
Diar, acknowledged as much, telling us that many of their
investments are for "political relationship building," and
not financial return. Diar also owns 45 percent of Barwa, a
real estate developer focused on building medium-sized
developments in Qatar.


13. (U) QIA has also established several joint venture funds
with other SWFs. According to press reports, QIA is a
partner in multiple billion-dollar investment vehicles with
government-controlled entities in Dubai, Oman, Indonesia,
Libya, Finland, and Malaysia.

Comment
--------------


14. (C) As noted in this report, there is little transparency
on the QIA's accounts and it is sometimes hard to distinguish
in the investment rumormill between Qatari public funds and
the ruling Al Thani family's personal wealth. In particular,
HBJ is personally worth billions of dollars and often makes
investments in line with those of the QIA - most recently
taking a personal stake in Barclays Bank in tandem with the
official fund. Investments undertaken by QIA and the ruling
family appear to be profit-motivated. However, as with the
political use of other government-funded instruments such as
Al-Jazeera, some investments will inevitably be colored by
the political predilections of the relatively small number of
Qatari officials making major investment decisions. This
seems particularly true of Qatari Diar and its real estate
investments in far-flung locales shunned by the global
economy but nonetheless important to Qatar's self-image as a
major diplomatic player.


15. Tripoli minimize considered.
RATNEY